Tax Planning

Capital Gains Taxes are those paid on any profits made from the sale of an asset and are usually applied to Real Estate sales Personal and Business, stock, and bond transactions. The capital gains tax rate for 2023 is 0%, 15% or 20%. Your rate depends on the amount of your taxable income. The higher your income, the higher your rate. Profits made from the sale of real estate are also subject to a capital gains tax. Single homeowners may exclude up to $250,000 of capital gain on the sale of a home, as long as the home was a principal residence for at least two of the five years before the sale; married couples filing jointly can exclude up to $500,000.

The federal government, 41 states, and many local municipalities levy income taxes on personal and business revenue and interest income. In most cases, income tax brackets are progressive, meaning that the higher the income, the higher the rate of taxation. Federal rates for the 2023 tax year range from 10 to 37%. State and city rates are generally much lower. 

In addition to federal income taxes, the U.S. government also mandates that employers subtract payroll taxes from their workers’ paychecks each pay period, and then match the sums deducted. These payments are called FICA taxes because they are authorized by the Federal Insurance Contribution Act. Total FICA taxes on individual workers are 7.65 percent of income; 6.2 percent goes to fund the nation’s Social Security system, while 1.45 percent goes to Medicare. Self-employed individuals are liable for the entire 15.3 percent, although one-half of that amount can be taken as an above-the-line business deduction on a person’s income tax return.

Property Tax, sometimes known as an ad valorem tax, is imposed on the value of real estate or other personal property. Property taxes are usually imposed by local governments and charged on an annual basis.
Other items that may be subject to a property tax are automobiles, boats, recreational vehicles, and airplanes. Some states also tax other types of business property.

The Sales Tax is most often used as a method for states and local governments to raise revenue. Purchases made at the retail level are assessed as a percentage of the sales price of a particular item. Rates vary widely between jurisdictions, 45 states collect sales tax.
Local Sales Taxes, typically administered by a city or county, are collected in 38 states. Surprisingly, the local sales tax in some places is higher than the state tax rate. Combined State and Local Sales Tax rates are as high as 11.5%
Excise Taxes are based on the quantity of an item and not on its value. For example, the federal government imposes an excise tax of 18.4 cents on every gallon of gas purchased, regardless of the price charged by the seller. States often add an additional excise tax on each gallon of fuel and on items like cigarettes and alcohol
User fees are taxes that are assessed on a wide variety of services, including airline tickets, rental cars, toll roads, utilities, hotel rooms, licenses, financial transactions, and many others
Luxury Taxes are imposed on certain items, such as expensive cars or jewelry.

Estate Taxes can be considerable, but the current estate tax exempts the first $11.7 million for an individual and $23.4 million for a married couple. Estate taxes are imposed on the transfer of property upon the death of the owner.  The maximum top estate tax rate is 40%. Many states also impose their own estate tax, sometimes known as an inheritance tax.  A tax related to the estate tax, and assessed in a similar manner, is the gift tax, levied on a transfer of wealth during a person’s lifetime. The first $17,000 of a gift is excluded from the tax for 2023.